EU leaders discuss $1.2 trillion post-Brexit budget

European
Union leaders will discuss a new budget plan on Friday that could allow the
bloc to spend up to 1.1 trillion euros ($1.2 trillion) in the 2021-2027 period,
but deep divisions among governments could block a deal for months.

Under a
proposal prepared by Finland, which holds the EU’s rotating presidency, the
next long-term budget should have a financial capacity between 1.03% and 1.08%
of the bloc’s gross national income (GNI), a measure of output.

That would
allow the EU to spend between 1 and 1.1 trillion euros for seven years with its
first budget after the exit from the club of Britain, one of the top
contributors to EU coffers.

The
document, as reported by news agency Reuters, is less ambitious than proposals
put forward by the European Commission, the EU executive, which is seeking a
budget worth 1.1% of GNI. The EU parliament called for an even higher budget at
1.3% of GNI.

But the
Finnish proposal moves beyond a 1% cap set by Germany, the bloc’s largest
economy.

Finland’s
midway solution has displeased most of the 27 EU states, EU officials said,
anticipating long negotiations before a compromise can be reached.

Talks on
budgets are traditionally among the most divisive in a bloc that in recent
years has become increasingly prone to quarrels, as its states are deeply split
over economic policies, financial reforms and how to handle migrants.

DEEP
SPLIT

The Finnish
proposal, which cuts spending on farmers and poorer regions, has managed to
unite the divided EU leaders in its criticism.

While the
bloc has embarked on a range of new expensive policies, such as protecting its
borders and increasing social security, states are reluctant to pay more.

Germany and
other Nordic supporters of a smaller budget argue that because of Brexit, they
would pay more into EU coffers even with a 1% cap because they would need to
compensate for the loss of Britain’s transfers.

Eastern and
southern states, who benefit from EU funds on poorer regions and agriculture,
are keen to see a bigger budget, and are not happy with Finland’s proposed cuts
on these sectors.

Under the
proposal, subsidies to poor regions would drop to less than 30% of the budget
from 34% now, while aid to farmers would fall to slightly more than 30% from
over 35% of the total.

To
complicate matters, the new budget should also include rules that would suspend
funding to member states with rule-of-law shortcomings, such as limits to media
freedom or the independence of judges.

This is
irking states like Poland and Hungary which Brussels has long accused of
breaches in the rule of law after judiciary and media reforms adopted by their
far-right governments.

Friday’s
meeting is seen as a starting point and is not supposed to find a compromise,
but divisions are so deep that many officials fear a deal may not be reached by
a self-imposed December deadline. A later deal would delay the launch of
spending programs.

The Finns remained confident, however, and insist their suggested spending range would eventually be backed by EU states. “The fact that almost everybody is against our text shows we have put forward a fair proposal,” one diplomat said.